Equity (down payment)

Equity (Eigenkapital) is the money you put into an investment yourself – without a loan. For property: your share of the purchase price plus purchase costs.

How much equity do you need?

• Recommended: at least 20% of the purchase price + purchase costs (10–15%)
• Optimal: 30%+ – better interest rates, lower instalments
• Minimum: you should ALWAYS pay the purchase costs (10–15%) yourself

Why equity affects the interest rate:

• 20% equity: best interest rates ("first-ranking security")
• 10% equity: 0.2–0.3% higher interest
• 0% (100% financing): 0.5–1.0% higher interest
• With a €300,000 loan: every extra 0.5% interest = approx. €15,000 more interest over 20 years

Where can equity come from?

• Savings (overnight money, ETF portfolio)
• Home savings contract (savings portion)
• Gift from parents/grandparents (tax-free allowance €400,000 per child!)
• Capital-forming benefits
• NOT recommended: dissolving your emergency fund or taking out a consumer loan